and now we will learn how to manage the chart of accounts you may well ask what is the chart
of accounts well in the old days the chart of accounts was called the general ledger it was
simply a notebook where each page in the book was a different record of a different category
of transactions in this example you could see it's a video company so page one was video income every
time they did a video job they wrote it down on page one page six was repair expense every time
they did a repair they wrote it down on page six then when they needed to make financial
statements or do their taxes they would simply take the total of each page and those totals were
the numbers that they put on the tax forms and their financial statements it's the same exact
thing with the computer except it's called the chart of accounts so an account is an individual
record of transactions you need an account for each bank account credit card account income
source and expense that your law firm has you will also need other accounts as well but they
will be explained more clearly as we add them deeper into the course the chart of accounts is
the name of the window that allows you to delete edit and add accounts to the chart of accounts the
first thing we need to learn is how to delete one of the accounts and the chart of accounts
that QuickBooks has put for us from the main menu we click list chart of accounts notice there are
already some accounts in the chart of accounts that QuickBooks put for us when we created this
file we told QuickBooks company type other none if we were to have chosen one of the company types we
would have a full giant list in this window of all the different accounts for that company type
but even if we choose none QuickBooks still puts these few accounts and notice the first letter
is capitalized and the rest is lowercase the ones that we add will all be in capital so we
can see clearly the difference between the ones that we add and the ones that quickbooks put now
it would be great if we could get rid of some of the ones that quickbooks put for example you can
click on payroll liabilities and if you go to the bottom left you can see that the bottom left of
the chart of accounts window this button is what controls the list at the moment this account is
selected we click account delete oh we can't delete that one we're not allowed what about
this if we clicked this one a account delete okay right well it won't let us delete that now it will
let us delete accounts receivable undeposited funds and opening balance equity but then it'll
come back edit delete account are you sure click ok opening balance equity is gonna come back it
automatically comes back but that's the process of deleting but then the question is what if we
want to delete one of the accounts and it won't go account delete ok you can quickbooks has it set up
that the few accounts it puts at the beginning you cannot delete so the answer to that is make
the account inactive well that's very simple we click on the account then the bottom left
we click account make inactive now payroll expense will seem to disappear but it's still there if you
click this box include inactive accounts you can see that all the names are indented and only the
account that is inactive has an X if I click here and I went make account inactive it puts an X next
to it that means that if I remove this check mark those two accounts will not be shown you could
always react evade them by clicking to see all of the accounts whether they're inactive or not
clicking on them and then clicking make account active we will leave payroll expense you know
inactive and I think we should also make payroll liabilities inactive because that's irrelevant
to our course then remove the check mark here and you'll only see three out of the several
accounts that we will need to be able to manage our chart of accounts and do our QuickBooks most
importantly you need to be able to add accounts to the chart of accounts now this is the set of
accounts that we're going to put in and we are not going to bother typing in the ones in lower case
we will only type in the ones and capital letters that's because the ones in lower case are the ones
that QuickBooks automatically put the ones with capital letters are the ones that we need to put
that are specific to our law firm these are not the accounts that are specific to law firms in
general that will come in the next video this is just the jit these are just the general accounts
that would apply to any business that it helps you learn how to manage the chart of accounts you may
notice that on the left that has account name and in a real situation you could type in any
name you want whatever name you give the account will show up exactly the way that you spell it and
type it in on any of the reports so if you type in this the name of this account with all capital
letters that's exactly the way to look when you run reports that show results of these accounts
however account type is something different account type is something that you choose to go
along with the name it determines how the account will behave in QuickBooks now something very
important to remember account type in QuickBooks is not the same thing as account type when you
study accounting Theory when you study accounting Theory account type which report the account will
go on what category what area of information it's showing that's accounting theory but in QuickBooks
when we say account type we mean how will it behave will it be a bank type of account so it
will open in a register window for us to record checks and deposits or for example will it be an
accounts receivable type of account that means it will be matched and equal to the total balance of
each customer so those are two accounts that you need but they need to behave differently that's
why you tell QuickBooks account type when you put it in so please trust that the account types make
the law firm functional if you do it exactly as you see it here so this is the list that we will
put in to the chart of accounts from the main menu we click list chart of accounts and in the
bottom left we click account new now this window is only for the first account of several that you
will put in on a list and we will put in bank type of account and then we will click continue and we
know from our list here that it's a bank type of account and it's called Chase Bank account so we
type in the name with the capital letters Chase Bank account then we can click Save and new now
notice if you click Save & new you'll stay in the same window and you'll be able to type in
the next one now let's skip the one in lower case and go down to the next one in capital furniture
that's a fixed asset so we come here and we type in furniture and of course the type is fixed
asset and then we click Save & new right then the next one we do that's capital accounts payable in
capital letters and it's accounts payable type so we come here and we choose accounts payable
type and in all capital letters accounts payable and then we click Save and new let's do one more
and then I'll show you something interesting Ross capital is equity Ross's the owner of the law firm
so if we click equity as the type and we type in the name Ross Ross capital look what happens if we
click Save and close if we click Save and close we can simply see the accounts that have been
already put on the list but look what happens when we go back to put more on the list account
new aha we're back at this first window so if you're putting them in one at a time you would
put the account type of the first one so the next one here is Ross withdrawals it's equity so we
would choose equity as the type click continue and then we click Ross with withdrawals save and new
then we go to the next one income from legal fees and that's an income type of account so we choose
income and we type in income from legal fees okay save and new then we go to the next one we'll do
one more and then we'll just skip the lower case and just come here court fees expense so that
would be the name of a typical lawyer expense so the type is expense and in capital letters
court fees expense okay and then click Save and close so there's only a few more ok there's one
two three four five six that you should put in after I stop this video and you should pause it
now and copy them in there all expenses then your chart of accounts will be ready for the next video